Guide on Restructuring of an Organization

Restructuring an organization refers to the change, alteration and reorganization of the operations, structure, legal, ownership and management aspect within the organization and also the mergers and acquisitions, take overs with other organizations (Balogun & Johnson, 2004). The World today is facing Globalization today and to cope with it organizations and production Companies have to adopt strategies like downsizing and restructuring that will help them to maximize the profit (Isaiah, 2004).
Restructuring of the organization is done in order to increase the profit, improve the internal structure and cope up with the increasing competencies in the market. It may also occur when there is a merger or change in the hierarchy of ownership or the entire ownership which is also called as a takeover. There may also be the financial as well as debt factors behind the restructuring of an organization (The Evolution and Restructuring of Diversified Business Groups in Emerging Markets: The Lessons from Chaebols in Korea, 2004). Apart from this, restructuring of the organization is also adopted by a company when it wants to make their business more efficient and improve business performance through cost reduction and increasing productivity (Balogun & Hope Hailey, 2003).

Researches on restructuring of organization
In his article in 1988, Peter. Drucker, one of the most acclaimed writer on management described that the market was full of organizations that had a fixed agenda, structure and pattern of operation throughout its execution and it was considered to be a prestigious factor with respect to the market image and there was rarely any adaptation observed. Employees used to serve an organization for a long period of time and this was termed as the employee’s loyalty towards the firm (Drucker, 1988). On the other hand, in 1998, Richard T Mowday, a famous writer on business organizations stated that there has been a drastic change in the relationships between the employee and the organization. Technological advancement and introduction of various new organizations in the core competent market led to the shifting of the employees from one organization to another (Mowday, 1998). Also recent research work done by James W. Gabberty and other authors along with him, provided the current scenario where the needs of the customer are increasing along with the number of providers in the market providing their services to the customers. Organizations have to adapt and execute rapidly to survive in this competent market (Gabberty, Bal, Crawford, & others).

All the organizations like banks, hospitals, pharmacies, hospitality services, educational institutions as well as law and accounts firms are striving for professionalism in its culture and operation. They have to face an unstable and complex environment which are very much prone to uncertainty. There is an increasing bar of competition between the personnel within the organization as well as from the other organizations. Global market has provided a large number of opportunities for establishing or developing a new organization. The development of the sense of sophistication among the customers has contributed to the increasing level of competition (Brock, Powell, & Hinings, 1999). Thus globalization, on one hand, has provided a scope for development and growth of an organization and its market, whereas, on the other hand, it has also contributed to the increased number of organizations and providers which has ultimately resulted in hard core competition among the organizations (Bowman & Singh, 1993).

Understanding restructuring and its keywords:
In order to sustain themselves and mark a growth in their business, organizations have to understand the uncertainty and the changes that occur in the global market. Organizations need to make a proper, systematic and in depth research on the above factors which will help them to forecast the changes in advance and develop a strategy that will help them to overcome any existing or futuristic problem. For better understanding and carrying put research on the organization, researchers need to allocate their time in practical interaction with the different departments and hierarchy present in the organization (Mohrman & Lawler, 2012).
There are many factors that play a significant role in restructuring and are considered when restructuring is done and they are:
Activation of social capital:
It is one of the way that helps to overcome the financial and societal uncertainty that is created as a result of restructuring. Social resources are identified, channelized and people start utilizing their references and contacts when restructuring is done. In order to continue the social support, many other trustworthy allies and ties are made, considering the image and organization’s objectives (Srivastava, 2013). A proper understanding and research is required regarding the brand image and reputation of the organization in the society. Organizations develop a plan and special strategy while restructuring is done with the motive of keeping the social bonds intact and utilizing the available as well as activating the capital derived from the society (Mohrman & Lawler, 2012).
Integrated management:
Restructuring of the organization requires integrating of the management and diversification of the tasks and operations. Management plays an important role in the success of the organization when restructuring is done. Integrating the top management of the organization is essential to achieve the predetermined goals (Zairi & Sinclair, 1995). Integrating the job characteristics will provide a better sense of understanding among the employees which will ultimately lead to better performance. Restructuring is also favorable to be executed when the company is open and willing to adopt more integrated ways of performing that are globally used and is widely flexible (Rugman, 2001). There is a contribution of the board of directors in the restructuring of the organization. It is observed that when the top management which is limited to the managers are involved in restructuring, more efficient decisions and results are obtained. This is mainly because they have a first-hand experience of dealing and interacting directly with the employees as compared to the directors and it helps them to analyze the potential of the employees and consider them while restructuring (Johnson, Hoskisson, & Hitt, 1993).
Strategies of the organization:
Strategizing involves developing strategies within the organization that will help to increase the efficiency and productivity of the organization. Strategic restructuring helps during the times of market drain, change in the board of directors, increasing core competency, shortage in funds, sudden breakdown of qualified, skilled professionals and other such emergencies (STRATEGIC RESTRUCTURING: A Tool for Improving Organizational Effectiveness, 2003). Strategies are developed considering the effect of the decisions and related modifications on the economy role that the organization holds in the society. Various policies introduced by the government for the growth of the business, which would uplift the nation’s economy are to be evaluated while designing strategies during restructuring (Faur, 1998). During strategic restructuring, four factors are to be considered and they are,
• Appropriateness of the situation for which strategies developed while restructuring,
• Results and outputs that the strategy yields,
• Type, form and structure of the strategy that would be best suitable for the organizations,
• Highlighting and focussing on the points that would directly lead to increased productivity and provide the desirable results (STRATEGIC RESTRUCTURING: A Tool for Improving Organizational Effectiveness, 2003).
Strategic restructuring is carried out to reduce the overall expenditure, improve the relation and build trust with the stake holders by improvement in service, survive in the core competition and accomplish various hurdles related to the leadership and management.
Employee empowerment:
Employee empowerment refers to the designing and assignment of job to the employees. While executing restructuring, the jobs, positions and titles are to be allotted to the employees on the basis of their potential, their capacity to handle stress, their capability to adapt to the changes and their psychological background (Ugboro, 2006). The manager at the higher level in the organization makes a model whose sole purpose is to involve and empower the workers to perform better in their respective job. The model is divided into three classes. First and primary stage includes internally motivated employee and their psychological state which must be able to develop. Second stage involves the job characteristic of the job that has been given. Third stage includes psychological effect of the allotted job characteristics reflecting the attitude of the personnel to whom the job is assigned matters the most. It is important that he takes this effect in a positive way to achieve increase in productivity from company and personal point of view (Hackman & Oldham, 1976).
Employee motivation and satisfaction:
The employees working in the company or an organization need to be motivated to yield better output and ensure completion of work with increased productivity. Self-determination theory suggests that humans should be kept motivating for the wellbeing of the company and states that this should be done until they experience psychological satisfaction (Deci & Ryan, 1985). The work motivation is best done by practicing the following three elements namely: Setting up a goal, expecting from them and social cognition (Edwin & Gary, 1990). Motivational management is considered as the central element of every organization’s challenge i.e. creating the environment where the workers feel content and do the best job possible (Noyelle, 1983). It is often observed that the workers or employees that have low self-esteem are tend to doubt themselves about their own potential on doing the work that is allotted to them as per their knowledge and skills. In such situations, feeling of high self-esteem may help them motivate and do their job better even in poor working conditions. In such cases it is expected that workers can also be motivated by providing various incentives like hike in the salary, special bonus, rewarding their performance and appreciating their work. Thus, ultimate results not only depends on the self-esteem but hugely depends on the employee’s efforts. This is because the base foundation of self-esteem motivation comes from the ability of personnel, his past job experience, his skill, knowledge, complexity of task he is going to perform , his psychological reactions like fatigue, emotions, feelings, stress, etc. (Richard & Lyman, 2003).

Market and environment uncertainty:
Uncertainty of the market and environment refers to the uncontrollable and inconsistent factors that are constantly changing. The basic reason behind the restructuring of an organization is the changes that its potential market undergoes. Environmental uncertainty is also one of the factor that results in restructuring of an organization. This uncertainties hugely affects the current network of the organization and lead to its diversification. This reduces the reach as well as the network of the individual which results in decrease in productivity (Srivastava S. B., 2011). It is also found that environmental uncertainty adversely affects organization’s efficiency to execute its strategies and develop any plan. The diversification of an organization depends on both, market as well as environmental uncertainty. A subsequent amount of research is required which involves identifying, understanding and analysing the various factors that contribute in the changing trend of the market. Environmental uncertainty needs a proper forecasting of the attributes and the characteristics (Lawless & Bergh, 1998).
Managerial role:
The manager plays a significant role when a restructuring is carried out. His attitude, choice of words, language and human approach contributes to the development of the organization through better performance obtained from the teams. The ability of the manager to understand his team depends on his past experience, his background and his interaction with the team (Balogun & Johnson, 2004). When a manager inculcates the culture of adapting flexible structures, multi-tasking of the operations and Manager’s work is not only to plan, organize and control the allocation and execution of work but also involves interacting, motivating and filling up the workers with positivity which will help to inculcate a better psychology among them resulting in better performance (Suman, 2003).
Each worker is unique from the rest which requires personal focus and analysis from the side of the manager while relocating them during restructuring. It also involves studying the type of training that each worker requires. If a manager fails to consider the above points, it can lead to inappropriate training of the workers which may adversely affect the productivity of the organization (Scott & Gary, 1992).
Forms of Restructuring:
There are various ways in which restructuring can be done in an organization and they are as follows:
Internal Restructuring
It is that form of restructuring which includes changes and alternations that are done within the organization without much substitution of the manpower (Baker & Kiymaz, 2011). It involves various ways which are:
a) Departmental or categorical restructuring:
It refers to that form of restructuring where the differentiation of the products are shuffled and restructured. There may be complete altering of the departments or a part of them to develop a better organizational structure that will help in the achievement of organizational objectives as well as help the sustainment of the organization in the market (Baker & Kiymaz, 2011). For example: LG company which first had divisions on the basis of process has now moved on to product wise categorization and restructuring where now differentiation is made on the basis of nature of product like washing machine, LCD’s, Cell phones, etc.
b) Operational restructuring:
It is that form of restructuring where changes and alternations are made in the flow of operations and its hierarchy. Here there is a diversification of the process on the basis of its operation like Human Resources, marketing, Research, Finance, etc. For example: Kotak Mahindra bank has now moved to operational differentiation (Zairi & Sinclair, 1995).
c) Downsizing:
In downsizing, there is a reduction or cut off made in the staff of the organization. Various attributes and characteristics are identified on the basis of which survivor employees are obtained. For example: Kingfisher Airlines had a major cut down in the number of employees due to large loss suffered by the firm (Carbery & Garavan, 2005).
External Restructuring:
It is that form of restructuring which includes involvement of an external source to restructure the firm (Baker & Kiymaz, 2011). It includes the following forms:
a) Mergers:
When two companies plan and decide to combine their organizations and form a single firm, it is termed as mergers. For example: Max life insurance which is an Indian firm collaborated with New York Insurance which is an international firm in USA and the merger is famous as Max York Life Insurance (Berger, Saunders, & others, 1998).
b) Takeovers and Acquisitions:
When a company has taken more than 50 % of the shares of another firm, then it may termed as a Takeover whereas when a small firm plans and strategizes itself to be adopted by a large firm it is termed as acquisitions. Takeover and acquisitions both involve a large firm undertaking a smaller firm, but the way by which it does that separates them from each other. For example: Facebook’s owner Mark Zuckerberg undertook a very famous chatting application called WhatsApp. This is an example of acquisition (Krug, Wright, & Kroll, 2013)
c) New plant location:
This form of restructuring includes the company that establishes a new unit or sets up a new plant in all together new location. There are various factors and detailed study of the location which are considered before setting up a plant. For example: Honda is going to set up a new production unit in New Mexico (Mohrman & Lawler, 2012).
d) Debt restructuring:
Organizations which find it difficult to repay their debts, share its debt with the investors in the form of equity. It involves using the social capital and providing an opportunity to the individuals to own a part of the company under predefined conditions (Srivastava, 2013).
Effects of Restructuring on Organization and employee’s productivity:
Unwanted change in role performance may have a large effect on workers mainly negative affecting the well-being of the workers and organizations. Sometimes when a worker gets conflicting requests or lack of information for the job, they are often suffered from job stress (Anton, 2009).The employee’s behavior depends mainly on job satisfaction of worker and commitment of organization which acts as mediate. The changes occurring in the organization are sometimes the reason behind the dissatisfaction among the employees, negative or disturbed psychology of the workers. Restructuring may also lead to conflicts among the employees regarding their roles, positions and importance in the organization and this may lead to formation of groups which may harm the objective of the organization (Swanson & Power, 2001).
At the learning or understanding level of analysis, we consider initial consequence of producing cognitive orders of executives which are at the higher level of the company or organization. Secondly, at the environmental level, we observe unexpected conflicts that happen at long term environmental level and disturb its balance (William & Georg, 2000).
When restructuring is carried out in an organization, special in cases of downsizing, it is found from the researches that among the survivor employees there is a sense of insecurity, willingness to quit and decline in the commitment towards the organization in terms of loyalty and trust among the employees (Ugboro, Organizational commitment, job redesign, employee empowerment and intent to quit among survivors of restructuring and downsizing, 2006).

An in depth research and study of the organization’s potential currently available and its future aspects that would be an outcome of the restructuring is to be made before actual execution. Manager has to go an extra mile to overcome the management bridge between the employees and the top management, which is created due to restructuring of the organization. (Ghosal & Bartlett, 1999).
Instead of senior managers to be considered as the main key in restructuring, the middle managers are said to be the key because they are the whole backbone of the process. They make the plan actually happen (Floyd & Wooldridge, 1997).
Proper allotment and specification of the employee’s roles after restructuring the organization should be made by the managers to avoid any confusion and unnecessary stress among the workers (Swanson & Power, 2001).

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March 9, 2018

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